Rehab investing basics

[Deion Alaei]

Hello,

I wanted to ask the bigger pockets community a question about rehabbing properties.

I've never thought about getting into that area of real estate, and truth be told, I think I'm familiar with the process but I'm not 100% sure.

Can anyone explain to me the basics and process of an investor buying a property to rehab and flip it - from the first step to the last?

I'm very curious specifically about the costs of it.

For example, do they pay out of pocket to buy the property and fix it or do they get financing - like from hard money lenders?

Do they pay out of pocket for escrow fees, holding costs, etc.

Between the point an investor buys a property to the point they officially flip it, what are the costs that specifically come out of their pockets as opposed to the costs that they can get financed?

do hard money lenders have strict rules about ones personal income/credit?

I'm mostly confused on the costs/finance part of the process, as you can tell.

Overall though, the more detailed you can be in explaining the process overall, the more helpful because I'm always trying to learn as much as I can - especially in real estate.

Also, I'd love to hear from you the pros and cons, the risks and rewards, would you recommend somebody get in that side of the business and tips/warnings for when they do, etc.

Thank you everybody.

[Bryan L.]

I've bought about 30 houses, with most of them being either rehab-and-flip or rehab-and-hold. I've completed one rehab/flip from start to finish this year, have two others on the market to sell, and another under contract to buy. There's way too much information required to fully answer all of your questions. There are books with several hundred pages written on the subject. But basically, buy a good deal at a low price, fix it up, and sell it. Your costs are going to be dependent on the deal, the amount of fix up, and the loan type. Sorry, I don't have time to go into details right now. Also, it can be risky. On one of my current deals I was looking to make 15-20 profit. But I went over budget on the rehab by several thousand, and the house is not selling as fast as I thought (so I'm having to lower the price). Now, I'm hoping to get out with 10 profit and move on. And I have another that will need new septic lines (which was not known up-front), so there will be additional costs there. But on the other hand, I cleared almost 30 on a rehab/flip recently.